The Collapse Of Barings Bank Case Study

This content was uploaded by our users and we assume good faith they have the permission to share this book.If you own the copyright to this book and it is wrongfully on our website, we offer a simple DMCA procedure to remove your content from our site. Report copyright / DMCA form The Dynamics of Organizational Collapse ‘This book investigates the events from Nick Leeson’s employment with Barings in Singapore in 1992 to Barings’ collapse in 1995, generating valuable insights based on a high-level multi-theoretical analysis involving psychological and sociological theories. B35D78 2008 332.1′20941—dc22 2007028584 ISBN 0-203-93277-3 Master e-book ISBN ISBN10: 0-415-39961-0 (hbk) ISBN10: 0-203-93277-3 (ebk) ISBN13: 978-0-415-39961-6 (hbk) ISBN13: 978-0-203-93277-3 (ebk) For Gannon Drummond, William Drummond, Alexander Drummond and Dominic Drummond Contents Preface Principal actors Summary of key events Introduction xiii xiv xv 1 Aims of this book 2 Approach to analysis 4 Validity of sources 4 Structure 6 1 The paradox of consequences 9 Why do organizations exist?

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Leeson’s mysterious disappearance is reported to Tony Gamby in London.

Peter Norris assembles a small team to investigate. account showed a shocking disparity between what they thought Leeson had been doing and the truth …

Printout of account 88888 discovered lying on Leeson’s desk reveals thousands of unauthorized trades, all losing money. The daily reports they had received from him had been complete fiction.

[They] had met daily and solemnly discussed the profits and supposed tiny risks of Leeson’s trading. (All that Glitters, Gapper and Denton 1996: 29) On Thursday 23 February 1995 the directors of Barings Bank hosted a lunch for City magnates.

Ron Baker interrupts his holiday to forcibly instruct Leeson not to increase positions.

Plc Board meets, attended by Mr Tuckey, Mr Norris and others.

It is a must-read and an insightful organizational behaviour analysis. 9 Bureaucracy in practice 11 Beyond rules 14 2 ‘A pisspot third-rate bank’ 16 ‘A pisspot third-rate bank’ 18 Enter Nick Leeson 20 The licence application 21 Events in Singapore 22 The audit report 23 3 Failing most successfully 24 Means/ends reversal 25 The impact of culture 26 The psychology of loss 28 Control as form 28 4 The dynamics of power Organization dynamics 32 31 x Contents 5 Did Nick Leeson have an accomplice?

I recommend it to all who are interested in a general psychological and sociological theory of how and why organizations fail.’ Ted Azarmi (California State University, Long Beach, USA) The collapse of Barings Bank was a commercial catastrophe that resonated worldwide, showing what kind of secrets can lie behind an apparently successful organization. 35 ‘Shooting fish in a barrel’ 36 Account 88888 37 An opportunity lost 38 6 Analysing the fatal disconnect 40 The Icarus paradox 40 The parable of the drunkard 42 7 Agency, structure and organizational collapse 43 Power and structure 44 The path to power 45 Scripts 46 8 From order filler to star trader 49 ‘A structure that will prove disastrous ...

It is not risk and uncertainty that should worry organizations, concludes Drummond, but what they are most sure of. I did not pay much attention to the item or the subsequent manhunt for the missing trader as I was busy writing a book about another City fiasco, namely the collapse of TAURUS, a large-scale IT project sponsored by the London Stock Exchange.

The collapse of Barings Bank had international ramifications, and this scholarly analysis will have an international audience as a result. It was only during the summer of 1996, after the book was finished, that I became interested as I sat by a stream on holiday and read Leeson’s story named Rogue Trader.

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